Gold Demand in 2018 Gets off to Quiet Start as Investment Slows

May 03, 2018 12:23 AM Eastern Daylight Time

LONDON--(BUSINESS WIRE)--Gold demand had a soft start to 2018, reaching 973 tonnes (t), the
lowest first quarter since 2008. This was largely caused by a fall in
investment demand for gold bars and gold-backed exchange-traded funds
(ETFs), as a subdued gold price environment hampered demand.

Global jewellery demand was roughly flat at 488t, down 1% on Q1 2017. Demand
in China was buoyed by holiday demand, and US demand continued to
improve in response to the supportive economic backdrop. In contrast,
Indian consumers were discouraged by rising gold prices, exaggerated by
a weakening rupee, with demand down 12% compared with 2017.

China, Germany and the US drove weakness in bar and coin investment:
global demand was down 15% to 254.9t. The range-bound gold price
undermined investor interest in these markets, although China’s weakness
was partly due to exceptional strength in Q1 2017.

ETFs saw their fifth consecutive quarter of inflows. Holdings grew by
32t, due solely to growth in North America. Investment in the first
quarter was mixed, with rising interest rates on the one hand, and a
sharp spike in stock market volatility on the other. As gold prices were
relatively subdued, many investors lacked a clear signal.

Central banks added 116t to global official reserves in Q1 2018. This
was the highest Q1 total for four years and in line with average
quarterly purchases since Q1 2010 of 115t.

Demand for gold in the technology sector continued to improve, up 4%
on Q1 last year. The wireless sector was a key area of growth as 3D
sensors for facial recognition were increasingly deployed in
smartphones, gaming consoles and security systems.

Alistair Hewitt, Head of Market Intelligence at the World Gold Council,
commented: “Relatively solid global economic growth, coupled with the
return of volatility in the capital markets in February, created a
stable environment for gold in Q1 – while equity markets around the
world came under pressure, the gold price rose.

Although demand was down year-on-year, we saw encouraging levels of
jewellery demand in China, the US and Europe, continued growth in the
technology sector, and steady inflows into ETFs, albeit at a slower pace
than last year. Solid inflows into central bank reserves also highlight
the ongoing relevance of gold as a strategic asset for institutional
investors.”

The total supply of gold increased by 3% in Q1 2018 to 1,064t, due to
increased mine production and net hedging. Mine production and recycling
levels both saw fractional increases compared with Q1 2017, at 770t and
288t respectively.

The key findings included in the Gold Demand Trends Q1 2018 report
are as follows:

Overall demand was 973t, a decrease of 7% compared with 1,047t
in Q1 2017

Total consumer demand fell by 6% to 743t, from 790t in the same
period last year

Total investment demand was down 27% to 287t compared with 394t
in Q1 2017

Global jewellery demand fell 1% to 488t, from 492t in the same
period in 2017

Central bank demand grew by 42% to 116t compared with 82t in Q1
2017

Demand in the technology sector increased 4% to 82t compared
with 79t in Q1 2017

Total supply was up 3% to 1,064t, from 1,032t in the same
period last year

Recycling was virtually unchanged at 288t, compared with 287t
in Q1 2017

The World Gold Council is the market development organisation for the
gold industry. Our purpose is to stimulate and sustain demand for gold,
provide industry leadership and be the global authority on the gold
market.

We develop gold-backed solutions, services and products, based on
authoritative market insight and we work with a range of partners to put
our ideas into action. As a result, we create structural shifts in
demand for gold across key market sectors. We provide insights into the
international gold markets, helping people to understand the wealth
preservation qualities of gold and its role in meeting the social and
environmental needs of society.

The membership of the World Gold Council includes the world’s leading
and most forward-thinking gold mining companies.